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The week that was:
There is an old saying on Wall Street - Buy the rumor and sell the news.
It means two things -
1) The market anticipates bad news in advance
2) The market does not like uncertainity
When there is talk of negative news that may happen in the future, the market goes down in anticipation of that event even before it occurs. But when the event actually occurs, then the uncertanity is removed and the market can look past that event.
It sounds weird but sometimes makes sense to buy when everyone else is selling and to sell when everyone else is buying. In volatile times like now, it is prudent to do some selling when the market is up big and to do some buying when the market is down a lot.
I had mentioned the following in last week's newsletter - There may be a panic attack in the market due to many negative events. People may start selling all their stocks and prices may crash. That may give me a great opportunity to buy stocks as people sell. Now I have cash available if it happens.
That panic selling happened this week. A big sell-off was caused by the Russian invasion. The initial reaction quickly reversed and the market registered a big comeback. I used the volatility to do some buying and selling.
Buys:
Unilever: Bought 8 at $48.54
Unilever was down by 5% on Thursday probably because it is a multinational company and is affected by geopolitical events.
Disney: Bought 2 at $143.77
My cost basis is Disney is much lower. But Disney is a strong company moving in the right direction and should benefit from the post Covid reopening.
Ross Stores: Bought 3 at $88.09
I added to my existing position in Ross. It is a well-managed company that has been impacted by Covid. It should benefit from the reopening.
Burlington Stores: Bought 5 at $209.88
Now I have all three discount retailers - Burlington, TJ Maxx, and Ross! It is an area I like and Burlington probably offers the fastest growth.
Meta Platforms/Facebook: Bought 5 at $196.31
I was looking to buy Meta under $200. It may not be the bottom but is not a bad price to start.
Sells:
I took advantage of the Friday rally to trim some positions and raise cash.
Medtronic: Sold 5 at $105.75
Clorox: Sold 3 at $147.25
Twitter: Sold 5 at $35.27
Booz Allen Hamilton: Sold 7 at $76.44
Aerojet Rocketdyne: Sold 30 at $36.9715 (Position closed)
I read an article this week about management trouble at AJRD. The CEO and Chairman are both fighting to take control of the company. I decided to sell out of this position because such problems usually linger for a long time.
What I am watching out next week:
The big rally on Friday was not convincing for a few reasons -
1) The market has been making lower highs and lower lows for several weeks. The overall trend is downwards.
2) The Ukrainian situation has little impact on the real issues in the market
3) The real issue in the market is high inflation and rising interest rates.
4) The market will remain under pressure until inflation is brought under control.
There is a good chance the market will resume it's downward trend in the days to come. I have raised my cash position in anticipation.